Why I'm sticking with stocks
It has been a scary decade for stocks.
We've seen high unemployment, slow economic growth, a housing crisis, a banking crisis and multiple crises in Europe, all of which have weighed heavily on stocks.
And before that, there was the tech bubble and 9/11.
It's enough to make many people think putting money in the stock market is a losing proposition.
Yet for all the problems we've had, and might continue to face, I'm still sticking with stocks.
The prospects for return could be dimmer than they were in the past, but long term I see the market as the best viable investment option to make a return on my money.
I invest with both my retirement accounts and my regular investment accounts.
I know things could get worse, much worse. And there's a strong chance that I could lose money in the short term.
But that's OK. I'm not concerned about what happens next week, next month or even in the next few years.
With my retirement investments, I'm thinking about where the market will be 10, 20 and 30 years from now.
I will not touch most of the money I invest in the market until I'm near 60 years old. And right now, I'm only 35.
It's hard to resist the temptation to act on rapid, hefty losses, but you have to think long term. If you don't, you'll quickly find yourself buying, selling or sitting out at the wrong time.
Think of it this way. You're planning to invest a dollar for 30 years. Would you immediately derail your plan because a month, year or two into it your dollar is worth only 80 cents?
Besides, I don’t see many better investment opportunities.
Some point to real estate.
Even on a buy-and-hold basis, the historical inflation-adjusted growth of real estate doesn’t touch that of the S&P 500.
And my big problem with real estate is that there are too many expenses. While buying rental property could be a good move for some, the last thing I want to be is a landlord.
And on top of that, the profit margin is just too thin.
I don't want to take out a $200,000 loan, pay all those expenses, go through all that trouble and take on all that risk for a few hundred dollars per month.
I like stocks because I don't have to do much. I do a little homework and check the news to make better informed investment decisions, but that's about it.
My portfolio isn't going to call me in the morning about a broken pipe. A hurricane isn't going to tear it down. I don't have to pay $5,000 annual insurance premiums on it.
Stocks also give me liquidity and flexibility.
I can liquidate my entire portfolio for less than a couple hundred bucks in fees and have it all in cash.
Try doing that with a piece of real estate. If you need cash from it, your only option is to tap a line of credit and pay interest on it or to try to sell it.
And selling it could take months.
Stocks also give me the option to average in and invest in small sums.
I can add $50, $100, $200 here and there to my brokerage account and buy a few shares from time to time.
Others point to the safety of certificates of deposit and bonds. Sure, they might be safe and have little risk of loss of principle, but I'm not impressed by 1.5% APY.
That doesn't even keep up with inflation.
So, in that sense, I'm guaranteed to lose money with CDs. And I'm guaranteed not to earn more.
Despite all the ranting against evil Wall Street, investing in stocks is one of the only ways for regular people to grow our long term wealth.
You're unlikely to get rich quick in stocks. You have to be able to look at the big picture and not get sidetracked or emotional about short-term setbacks.
Even in what we’ve called the “lost decade” for stocks, I’ve still made money -- more than I would have in any other asset class.
I’m sticking with stocks.